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TMI Blog2021 (4) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... ual income. The object of Section 14A is to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. It is also clarified by us that while recording the conclusion in KINGFISHER FINVEST LTD. [ 2020 (10) TMI 518 - KARNATAKA HIGH COURT] that disallowance under Section 14A has to be made even taxpayer has not earned any exempt income, this court has misread the ratio of the decision of the Supreme Court in MAXOPP INVESTMENT LTD supra and therefore, the aforesaid view being contrary to the law laid down by the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, against which an appeal was preferred before the ITAT and the ITAT taking into account the judgment of the Hon ble Supreme Court in the case of INDIA CEMENTS VS CIT (60 ITR 52), has upheld the decision of the CITA and has dismissed the appeal of the revenue and the revenue is before this Court in the present appeal. 3. This Court has admitted the present appeal on the following substantial question of law. whether on the facts and in the circumstances of the case and law, the Tribunal is right in law in setting aside the addition of ₹ 2,48,72,710/- to total income of the assessee as the ingredients of Section 14A read with Rule 8D(2)(iii) are satisfied in the case of the assessee and without appreciating that the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective operation. It is noteworthy that aforesaid Circular was not even relied by the parties. This court in COMMISSIONER OF INCOME TAX VS. KINGFISHER INVESTMENT INDIA LTD . vide judgment dated 29.09.2020 inter alia held that disallowance under Section 14A read with Rule 8D has to be made even when taxpayer in a particular year has not earned any exempt income. This court relied on the decision of the Supreme Court in MAXOPP INVESTMENT LTD supra which was reproduced in Paragraph 5 of the decision and reliance was also placed on Circular dated 11.02.2014 issued by Central Board of Direct Taxes (CBDT). However, the aforesaid decision was subsequently considered by this court in judgment dated 16.01.2021 passed in I.T.A.No.271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has to ultimately trade those shares by selling them to earn profits. The situation here is therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee company. In that case, whenever dividend is declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Therefore, even that the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to income of actual income or not notional or anticipated income. Therefore, the conclusion arrived at by us in M/S NOVEL SOFTWARE INDIA (P) LTD. is affirmed but for different reasons. It is also clarified by us that while recording the conclusion in KINGFISHER FINVEST LTD. that disallowance under Section 14A has to be made even taxpayer has not earned any exempt income, this court has misread the ratio of the decision of the Supreme Court in MAXOPP INVESTMENT LTD supra and therefore, the aforesaid view being contrary to the law laid down by the Supreme Court is not a binding precedent. 6. In the light of the aforesaid, as identical appeal has already been decided and the question of law has been answered against the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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